TCM moves to US GAAPTORONTO, Jan. 25 /CNW/ - Thompson Creek Metals Company Inc. ("Company"), one of the world's largest publicly traded, pure molybdenum producers, today confirmed it will use U.S. generally accepted accounting principles ("US GAAP") when it discloses its 2009 fiscal year end financial results in February 2010. The Company had previously disclosed its financial results using Canadian generally accepted accounting principles ("Canadian GAAP"). All dollar amounts below are in U.S. dollars unless otherwise indicated.
The Company previously announced on November 5, 2009 that more than 50% of its outstanding shares were held by U.S. residents, and consequently it is required to comply with U.S. Securities and Exchange Commission public reporting filing requirements as of January 1, 2010. As a result, the Company will prepare its 2009 consolidated financial statements (including the recast of previously reported annual and quarterly financial statements) in accordance with US GAAP instead of Canadian GAAP.
There will be several impacts to the Company's fiscal 2009 consolidated results from the adoption of US GAAP, but the most significant is the US GAAP accounting treatment of the Company's 24,504,000 outstanding warrants (exercisable at CDN$9.00 per common share until October 23, 2011). The warrants are traded on the Toronto Stock Exchange under the symbol TCM.WT.
Under Canadian GAAP, these outstanding warrants have been classified in equity. However, under US GAAP, since the exercise price of these warrants is denominated in Canadian dollars instead of the Company's functional currency (U.S. dollars), each reporting period the Company is required to reclassify these warrants as a derivative liability and adjust them to fair value each period through a non-cash increase or decrease to consolidated net income.
Despite the US GAAP accounting treatment described above, only one of two scenarios can occur with regard to these warrants. If the warrants are exercised, the Company will receive cash proceeds of CDN$9.00 per warrant exercised and issue shares of the Company's common stock. Or, alternatively, if the warrants expire unexercised, no cash proceeds will be received and no common shares will be issued. The warrant holders' right to exercise these warrants expires in October 2011. The Company believes it is important to note that under either of these two scenarios, there is no possibility for a cash outlay by the Company other than minor administrative expenses related to the exercise of warrants.
Additional information regarding this accounting treatment is available in Management's Discussion and Analysis for the three and nine months ended September 30, 2009 that was issued on November 5, 2009.
The market value of the outstanding warrants was approximately $22 million on January 1, 2009 (equivalent to CDN$27 million or CDN$1.10 for each warrant outstanding) and was approximately $115 million on December 31, 2009 (equivalent to CDN$121 million or CDN$4.93 for each warrant outstanding). As discussed above, the change in the fair value of these warrants in fiscal 2009 will result in a pre-tax non-cash charge in the Company's 2009 consolidated statement of operations of approximately $93 million. This pre-tax charge will be applied as an "other expense" deduction in the Company's fiscal 2009 consolidated statement of operations.
As a result of this non-cash charge related to the warrants, the Company expects to report a net loss for fiscal 2009. Excluding this non-cash charge related to the warrants, the Company expects to report adjusted net income for fiscal 2009. The Company is currently in the process of finalizing its fiscal 2009 year-end results and the related audit. More details of the Company's 2009 financial performance will be provided when the Company announces its 2009 financial results, which is planned to occur after the market closes on February 25, 2010.
The Company's quarterly and annual earnings for 2010 and 2011 will also be impacted by non-cash gains or charges related to the change in the market value of the warrants until the warrants are either exercised or expire in October 2011.